2:30 - 3:30   SB 32: A New Era for California Markets and Beyond

 

Moderator: Tyson Keever, President and CEO, SeQuential

• Shelby Neal, Director of State Governmental Affairs, NBB, What's Next for California
• Ian Thomson, President, Advanced Biofuels Canada, What's Next for Canada
• Tyson Keever, President and CEO, SeQuential, What's Next for Oregon

California's Biodiesel Market Promise 

Highlighted at National Biodiesel Conference

California's biodiesel market was a hot topic on several panels at the National Biodiesel Conference in San Diego in January. Jennifer Case, Chair of the California Biodiesel Alliance (CBA) and President of New Leaf Biofuel, moderated a very well attended session on "California's Thriving Low-Carbon Markets."

 

It began with CBA lobbyist, Louie Brown, making the point that our very blue state is now the 6th largest economy in the world and is led by a governor committed to the state's climate programs, including a 50% reduction in petroleum use. He outlined many of the key issues that affect biodiesel, detailing his work to correct the implementation of AB 692 - which calls for the use of low carbon fuels in state fleets but prohibits biodiesel use - and to make sure biofuels are not included in this year's AB 1/SB 1 to increase fuel taxes. Importantly, as the leader of CBA's effort to secure auction proceeds for in-state biofuels incentives through the Biofuels Initiative, he said that the effort will ask for $100 million this year from the state's Cap and Trade auction proceeds, out of an overall 2017-18 Expenditure Plan of over $2 billion.

 

Ryan Lamberg,  of the California Biodiesel Initiative, discussed the state's regulations aimed at addressing the fact that transportation is responsible for 40% of GHGs, 80% of NOx and 95% of PM. He cited that the 20% GHG reduction under LCFS is expected to rise to 18-25% by 2030 as part of the overall state-wide 40% CI reduction by 2030 required by SB 32. He presented data on the current and expected growth of biodiesel, pointing out that from 2014-2015, biodiesel consumption in the state grew from 83 to 140 million gallons, rising from an effective B3 to B5, as biodiesel's CI scores have decreased. Demand is expected to rise to 800 million gallons by 2024.

 

Regarding the challenge of this heavy lift and his hope for a solution to several regulatory challenges, he stressed his expectation of positive outcomes for a state-and-industry approved NOx mitigation additive - to address the Alternative Diesel Fuel regulation (ADF), which will otherwise restrict biodiesel to very low blends - and a strategy for addressing the Low Emissions Diesel regulation that will require 50% lower NOx alternative diesel fuels through 2031. He pointed to the importance of our industry continuing our partnerships with other alternative fuels to take action to defend LCFS and support third-party science.

 

Cynthia Obadia , of Cynthia Obadia Consulting, put the discussion into perspective by talking about the other sectors contributing and competing with biodiesel under the LCFS. She said that beginning in 2016, LCFS credits were generated and sold by in-state utilities for residential EV charging and by transit agencies with electric buses.  Even so, Governor Brown's goal of 1.5 million EVs on the road by 2020 is falling behind, and while electric vehicles will likely see the largest percentage growth, this sector remains small as a percentage of the overall transportation pool. Similarly, hydrogen remains a very small sector. With CNG and LNG growth declining in recent years due to low diesel prices, she cited significant growth of renewable natural gas. She added that we could see rising demand in the heavy duty vehicle market for l ow-NOx natural gas combustion engines coupled with RNG because this addresses the important California goals of reducing carbon and NOx emissions, especially in disadvantaged communities.

 

Greg Staiti, of Weaver & Tidwell LLP, presented details and compliance information for the LCFS (including information about inventory management and mass balancing), GHG reporting, and the ADF regulation. He discussed ARB's current rulemakings on the post-2020 LCFS targets and the LCFS mandatory verification program. During the question and answer period, he stated that he believes refiners will seize any opportunity to generate credits using co-processing, adding that we are already seeing this in the market with biocrude.

 

On the panel "How Biodiesel Makes the World a Better Place," Stephen Kaffka, Director of the California Biomass Collaborative and extension specialist in the Department of Plant Sciences at the University of California, Davis, presented a positive view of our food system. He talked about his work teasing out the potential of Camelina, energy beets, Canola, mustards, and salt-tolerant oil crops that can be grown in California while trees are coming into their production years, during winter, and using other strategies. Citing our state's commitment to providing economic and environmental benefits to disadvantaged communities, he stressed the importance of biodiesel businesses in those areas.

 

Citing that alternative fuels have grown by 43% in the last 5 years, Simon Mui, of the Natural Resources Defense Council, speaking on the panel "Spotlight Session: The Future of Lower-Carbon Fuels," discussed the value of multiple policies working together to overcome barriers and create value for different fuels. He pointed out that alternative fuels have grown by 43% in the last 5 years, that Cap and Trade creates an additional 13 cents per gallon value for biofuels, and that California has more jobs related to clean energy than to the petroleum industry.

 

The question came up as to whether the Trump administration could rescind the federal waiver that California uses to enact stricter environmental regulations, which exists because our emissions laws preceded the creation of the US EPA and the Clean Air Act. In response, Mui said, "We've never seen a waiver rescinded, and it would be legally challenged for years to come. Nothing will change overnight, and there will be a fight. We are going to educate the EPA about what would be lost if they go down that path."

 

Policy notes and quotes from the 2017 National Biodiesel Conference & Expo, and my own perspective on what could truly make Trump a biodiesel believer

 

By  Ron Kotrba  | January 25, 2017

 

The very first words out of former U.S. Senator Byron Dorgan's mouth when asked during the spotlight policy session at the National Biodiesel Conference in San Diego about what a new Trump administration will mean for biodiesel were "I don't know. We don't know."  This perfectly encapsulated essentially all of the political discussion from the event. Uncertainty abounded as everyone wondered how Trump-whose election victory relied so heavily on rural America and the heartland where biodiesel plays integral roles revitalizing economically depressed communities and providing energy for the coasts where population centers and the need for low carbon fuels exist-will affect biodiesel policy.

 

Days later, after taking office, President Trump has taken several actions that concern broad segments of the population, including rural Americans, those concerned about climate change and air quality, Native Americans and renewable fuel proponents, not to mention the millions of women who marched this weekend in opposition to the new president.

 

Trump has frozen new and pending federal regulations to give the new administration time for review. "This is typical of White House transitions, especially when the party also changes," says Anne Steckel, vice president of federal affairs at the National Biodiesel Board. "It provides time for the incoming administration to review the most recently issued regulations of the prior administration to note any they would like to further review. While this action does change the effective date for the 2017 standards under the renewable fuel standard (RFS), the RFS implementing regulations remain in place, including how the renewable volume obligations (RVOs) are calculated and the compliance deadlines. The standard-setting process is an annual process that just happened to fall within the defined date range. The RFS is clearly working to support a growing biodiesel industry that now supports more than 64,000 jobs across America."  

 

The new president, an avowed climate-change denier, is taking action to scrub all climate change information, data and references from the White House and U.S. EPA websites.  "The EPA's public scientific information is vital to the health and safety of our communities, not a political toy for the fossil fuel industry hacks who have invaded the agency to play with," says Sierra Club Executive Director Michael Brune. "This purge by the Trump administration leads down an extremely dangerous and dark path, and must stop now."

 

Trump has signed executive orders to expedite approval to construct the Keystone XL Pipeline and to complete the remaining portion of the Dakota Access Pipeline. The Standing Rock Sioux Tribe in North Dakota has been adamantly opposed to completion of DAPL because the pipe is to cross the sacred waters of the Missouri River and, as the tribe members say, "Water is Life." Last year I marched with members of the Standing Rock Tribe and others in opposition to DAPL. The even took place in downtown Fargo, North Dakota, to bring awareness to the issue out west.

 

Last week at the National Biodiesel Conference, much discussion was held on what a new Trump administration will mean for biodiesel. After all the talk and speculation, even the most knowledgeable experts' opinions were reduced to "We just don't know."

 

"We don't know what's yet to come, but we're anxious and excited to see," said Paul Argyropoulos, a senior policy advisor in EPA's Office of Transportation & Air Quality. Argyropoulos spoke to attendees via Skype. "How we move forward depends on a number of factors." He said EPA has been working on the 2018 RVO standards (and 2019 biomass-based diesel standards) since December, and he discussed the greater divide between volumes in the Energy Independence and Security Act and what the reality of the market is, particularly for cellulosic biofuel. Argyropoulos mentioned the RFS standards resetting process, which is triggered when a volume standard set in the statute is reduced 50 percent in one year or 20 percent two consecutive years. In response to my question on this topic, Larry Schafer, senior advisor to the NBB and co-founder of Playmaker Strategies, said the reset procedure will likely not affect biomass-based diesel since there are no volumes beyond the 1 billion gallon floor in RFS. "There are 20 factors to look at in the reset process," Argyropoulos said. "They're not weighted. It's a lot of work." He said EPA will continue to monitor the issue over this year and next. He also discussed the voluminous litigation over RFS. "There's been a lot already and there's more to come," Argyropoulos said, referring in part to the lawsuit over EPA's use of its general waiver authority. "Before we do anything major, we'd like to hear what the courts do on that."

 

Schafer followed Argyropoulos in the same session and said there are 14 senators on the Environment and Public Works Committee who view biodiesel and advanced biofuels favorably. "In the Senate and the EPW, we're in a good spot," he said. "But that doesn't mean Pruitt will be favorable to biodiesel. The petroleum world feels good about these nominees-Perry, Pruitt, Tillerson-but we [the biodiesel industry] are not in a horrible position. Many of the issues out there are issues between the ethanol and oil industries." He said many of the people at EPA who have been instrumental in RFS policy since 2007 are still at the agency, and NBB and biodiesel advocates will continue to work "creatively and heavily" with outside forces-the USDA, the new president and his administration-to move the biodiesel needle forward.

 

"There are legal issues and a new administration, but the basic plan is we will start in the same place as we ended in 2016," Schafer said, adding that what isn't known is how those outside forces, including the new administration's Office of Management and Budget and its potential desire to rely more heavily on a pure cost-benefit analysis, will affect progress. "We have experience in this process, and that will be beneficial to this industry," Schafer concluded.

 

The spotlight session at the National Biodiesel Conference & Expo last week featured Steckel as the moderator; former U.S. Senator Dorgan, D-North Dakota; former U.S. Representative Kenny Hulshof, R-Missouri; Jim Massie of Jim Massie & Partners LLC; Timothy Urban, Washington Council Ernst & Young; and Tom Hance with Gordley Associates.

 

When asked what a Trump administration will mean for biodiesel, Dorgan said, "I don't know. We don't know." Dorgan held in his hand the latest issue of Biodiesel Magazine, the cover article for which is "Biodiesel Renaissance," he pointed to it in front of the crowd and said this upbeat, positive story of biodiesel featured on the cover of our Winter 2017 edition is a message that needs to be conveyed to the new administration. Dorgan said this magazine needs to be delivered to Trump so he can see the major, positive impact biodiesel is having on the rural economy. "We have a need for good public policy to continue growth in biodiesel," Dorgan said.

 

It was said in session that Trump is breaking all the rules, as we've never had a president 

wake up in the morning and start tweeting before anything else.

 

Hulshof said, "This is going to be a novel and it's not yet written." Then, in reference to RFS, he said, "If EPA is to honor the intent of Congress, then the responsibility [of the future of the RFS] lies squarely on the halls of Congress."

 

Big issues Trump will be tackling are healthcare and tax reforms, an infrastructure bill, and a budget. Urban said the last major U.S. tax reform bill was in 1986. "For tax nerds, this year is the Super Bowl," Urban said.

 

While discussions focused on mechanics of budget reconciliation rules, the border adjustment tax and other initiatives and procedures, Dorgan said there's a 50/50 chance of getting major tax reform this year vs. an interim tax extenders package in lieu of reform. Urban said if tax reform doesn't pass this year, or stalls due to opposition, a tax extenders may be possible. "But now it's very early in the process," he said.

 

Tax extenders impact a relatively small number of industries, but tax reform is a massive undertaking that touches virtually every corner of this country. "Tax reform is always a dangerous game," Urban said. "We will have a say. But there's a tremendous amount of competition for the attention of these legislators."

 

Hulshof said with this new, blank slate of the Trump administration lies opportunity. "The renaissance of rural America has to include those red areas," he said, adding that there are four new people on the ways and means committee that must be reeducated to the benefits of biodiesel. Dorgan said while there is opportunity with a new administration, "We must understand the cold reality of the challenge as well."

 

Dorgan continued, saying, "The advantage of biodiesel is fuel diversity. And its lower carbon output is a huge advantage." Dorgan added that job creation provided by biodiesel secures a brighter future for America. "If the administration knew all this, they should embrace it and brand it as their own."

 

Massie said while we are challenged with a new EPA under Trump and Pruitt, the biodiesel industry needs to make sure it continues to have a strong relationship with the office and administration to advance growth. "I don't think Trump will go back on what he said of the RFS during his campaign but there's a lot of room for error, a lot of wiggle room," he said. "We need to redouble our efforts in 2017."

 

One action a new EPA could take to help fulfill Trump's vision of keeping tax dollars in the U.S. while supporting domestic manufacturing and energy independence is to reverse the alternative feedstock tracking approval given to Argentine producers that has facilitated hundreds of millions of gallons of biodiesel into the U.S. under the RFS program, making it eligible for RINs and tax credits. According to Susan Olson with Genscape, Argentina imported 426 million gallons of biodiesel into the U.S. in 2016. According to the NBB news release we published yesterday, the U.S. imported more than a billion gallons of biodiesel last year in total. Two actions to help curb this would be to reverse the EPA's decision on alternative feedstock tracking for Argentine producers and simultaneously to reform the biodiesel blenders tax credit to a domestic production credit.

 

To conclude, I say Dorgan is onto something. Trump does need to read our latest issue of Biodiesel Magazine. And after doing so, someone needs to take Trump on a tour of one of our nation's many state-of-the-art biodiesel refineries, such as an REG, Louis Dreyfus or Hero BX plant, and show him the innovation, jobs, energy security, the revenue-generating outlet for farmers, grease collectors and renderers that these facilities provide. And then go down the chain and take Trump to the truckers and railroaders who move this product and earn a good living doing so. And the terminals where hundreds of millions, if not billions, of dollars have been invested over the past 20 years for storage and blending biodiesel. And finally Trump should be taken to any diesel fuel pump, say in Minnesota or Illinois, where he can see firsthand that any diesel driver who fills up their tank does so on 10 or 11 percent biodiesel, a double-digit percentage of fuel that comes not from hostile nations or pipelines that flush dirty tar sand crude from Alberta jeopardizing the Ogallala Aquifer, or cut through sacred Native waters, but from the people who helped elect him. He can then see the biodiesel industry for what it is-an industrious, domestic manufacturing sector full of hope, innovation, vision and economic activity that has been working diligently to free society from the chains of its single-source energy complex while providing jobs and a better tomorrow, for which the children of our children's kids will be grateful.

 

Read the article as it appears in Biodiesel Magazine.

(AGRIMARKETING)

Soybean Leader Ron Heck 

Shares Insight on President Trump and Agriculture

Posted  January 30, 2017

Understanding Biodiesel CI Scores and Their Importance

Dr. Zhichao Wang, Ph.D.

EcoEngineers

Carbon credits from both federal level (RINs under RFS program) and state level (California LCFS credits) are very important to biodiesel producers, especially when crude oil prices are at a low level. Carbon credits are stackable at the federal and the state level. This can make it attractive and economically feasible to ship fuels from Midwestern, or even Eastern, US states to California over thousands of miles.

Carbon credits are decided based on the carbon intensity (CI), the life cycle greenhouse gas (GHG) emissions per unit of fuel energy, of the fuel. Under the RFS, biodiesel is determined to have a higher than 50% GHG reductions compared to petroleum diesel. Under the CA LCFS, however, the CI of biodiesel varies for each individual producer depending upon the feedstocks used, fuel production processes and inputs, facility location, transportation mode, and transportation distance for the fuel.

Understanding the CI score and making efforts to obtain a low CI is essential for producers who want to ship their fuels to California. Other states are also implementing or preparing to implement similar low carbon fuel standards which may provide alternative markets. Having a low CI makes producers' fuel more competitive on the market and can generate more revenue than a fuel that has a higher CI.

Under the CA LCFS, CI is calculated using CA-GREET model, (currently version 2.0 after re-adoption by CARB in 2015). CA-GREET 2.0 calculates the carbon emissions from different stages of the "life cycle" of a fuel, including feedstock production and transportation, feedstock conversion to biodiesel, biodiesel transportation and distribution, biodiesel combustion in vehicles, as well as the indirect land use change (iLUC) emissions for some feedstocks.

Generally speaking, biodiesel is being produced from two major categories of feedstocks- plant oils (e.g. soy oil, canola oil, palm oil, etc.) and waste oils (e.g. use cooking oil, tallow, waste vegetable oil, etc). Corn oil is technically not a waste oil, but considered more similar to waste oils from the standpoint of life-cycle analysis because it is a co-product from corn ethanol production.

There is a significant difference regarding iLUC emissions between these two categories. Under the LCFS, iLUC values for soy, canola, and palm biodiesels are 29.1, 14.5, and 71.4 g CO2e/MJ, respectively. For waste oils, the iLUC value is zero because they are wastes. There are also differences of emissions from feedstock production/preparation. For plant oils, agricultural inputs are significant. While waste oils don't need any agricultural inputs, they do have to carry the burdens of collection, transportation, and preprocessing (e.g. rendering).

The feedstock production/preparation stage contributes about 10, 20, and 25 g CO2e/MJ for soy, tallow and canola biodiesel, respectively. This stage is below 10 g CO2e/MJ for both UCO and corn oil biodiesel. Corn oil has additional burdens to its CI score because corn oil extraction reduces the DGS mass produced. The corn oil extraction adds a CI burden slightly higher than 10 g/MJ.

Difference of energy and material inputs for converting different feedstocks exists, but usually has minimum influence on CI. This means the CI from the conversion stage is generally comparable for all feedstocks. Inputs at the facility include electricity, natural gas, or other process energy sources, as well as methanol, sodium methylate, caustic soda, and other chemicals. The total CI in this stage usually ranges between 10-15 g/MJ, with electricity, natural gas, and methanol being the top contributors. CI from transporting and distributing biodiesel product depends on the mode and distance. From the Midwest to CA, it is usually around 2-4 g CO2e/MJ, with rail being the predominant transportation method.

Overall, the CI for biodiesel produced from soy and canola oils are in the range of 50-60 g CO2e/MJ. It is about 30 g CO2e/MJ for corn oil, 40 g CO2e/MJ for tallow, and 20-30 g CO2e/MJ for UCO biodiesel. As can be seen, biodiesels generated from waste oils typically have lower CIs than those from plant oils.

The CI for any pathway is dependent on the producer. Producers typically don't have much control of upstream emissions and iLUC, but can use more efficient practices and/or innovative technologies to lower the CI at the conversion stage (at the facility). Such innovative technologies include the use of combined heat and power (CHP), onsite power generation from wind and solar, and the use of biogas from landfills or digesters, to name a few.

Obtaining a pathway under LCFS takes time and effort, especially for producers that are using or planning to install innovative technologies to lower their CI. EcoEngineers has worked with producers to submit more than 60 pathways and can provide consulting services on, and beyond, pathway applications.

Dr. Zhichao Wang can be reached at: [email protected]  or 515.985.1278 .